In preparation for the 2018 proxy season, ISS has released its updated policies. Changes to compensation and governance-related items included the following:

Financial Metrics. As previously reported, ISS will update its Pay for Performance quantitative screens to include the rankings of CEO pay and financial metrics (three or four metrics will be chosen depending on industry) as measured over three years as compared to peers. ISS has not yet disclosed details of the methodology, which will be forthcoming shortly in an updated white paper.

Director Pay. Beginning in 2019, ISS will vote against directors if there is "a pattern" (two or more years) of "excessive" director pay without a compelling rationale. This reflects an increased focus by ISS and investors on rising director pay and a strong investor response on its 2017-18 policy survey recommending voting against directors where a pattern of excessive pay is identified.

Board Diversity. Although ISS has stopped short of including gender diversity as a factor in its vote recommendations on directors, it will now identify in its reports companies that have no female directors on the board so that investors can engage with those companies if desired. Specifically, its policy now includes a statement that "Boards should be sufficiently diverse to ensure consideration of a wide range of perspectives."

For most companies, the most important change is the inclusion of the Relative Financial Performance Assessment in the quantitative screens, since that may result in changing some companies' status from "low" to "medium" concern or vice versa. The Center will monitor and report on further updates to ISS's policy guidelines regarding the details of this change.